At 05.15 hours on 31 May 1941 the unescorted and unarmed Holmsteinn (Master Ásgeir Sigurðsson) was sunk by gunfire by U-204 about 65 miles west-southwest of Dyrafjord, Iceland. The U-boat had spotted the fishing vessel about 4 hours earlier and tried to evade it, but Kell assumed that they had been spotted and decided to sink the vessel to prevent that the presence of the U-boat in the area became known to the enemy.